and we would expect just to see that come up a little bit over the next few years.

Wilkening:Okay.

McDonald:Get more in line with a long-term trend instead of staying so low.

Wilkening:Kind of like the state’s average as opposed to a low point.

McDonald:Yeah.

Chair:Thank you for much. Jered, you’re going to now talk to us about the trust fund, is that correct?

McDonald:Yes, sir. I will now be moving into the trust fund portion of my presentation. This presentation contains historical and projected analysis of the Nevada Unemployment Insurance Trust Fund. My discussion topics will include a review of program objectives, a look at trust fund balances, review of current estimates, the 2007 forecast and tax rate alternatives. We’ll also take a look at a 10-year projection and wrap up with forecast wild cards and a tax rate recommendation. This slide presents the objectives of the unemployment insurance system. The unemployment system is set up to provide macroeconomic stimulus and stability to the economy and microeconomic support to households. This macroeconomic stimulus seeks to mute the effects of a downturn in a business cycle. In a recession, as workers are laid off, their spending drops significantly, negatively affecting businesses in the area and potentially leading to further job losses as those businesses cut more jobs. Unemployment insurance provides an automatic stabilizer that comes into play when individuals apply for benefits. These benefits are usually spent on day-to-day living expenses and thus help maintain aggregate consumption during a recession. The microeconomic support seeks to protect households when faced with unexpected job losses. Benefit payments help provide temporary and limited income support to maintain a workers connection to the local workforce while supporting a job search and allowing households to keep up on their bills. These objectives are achieved through the principal of counter cyclical funding, also known as forward funding. Under this principal, the trust fund accumulates a reserve during times of economic growth and pays out significantly higher benefits than it takes in during a recession. The fund needs to grow to a level high enough that it can pay out benefits in down times without becoming insolvent. This slide highlights the simple flow of funds into and out of the trust fund. You can see that during periods of economic growth, the taxes paid into the fund generally exceed benefits. Also notice that during recessions, the benefits paid significantly increase relative to the combined tax and interest income. As you can see in the early 90's and around 2002 and 2003. This highlights the need for forward funding. If Nevada were to wait for a recession to try to fund the needed unemployment benefits, a so-called pay-as-you-go approach, taxes would have to be increased significantly in the midst of a recession, placing an even larger strain on employers just at the time when they can least afford it. Our next slide shows the overall balance of the trust fund and how it’s fared over the last 24 years. You may observe that the fund balance, even at a low point in the most recent recession is roughly four and a half times